Chinese
exports to Pakistan are much higher than
what official statistics show

From: KHALID BUTT Lahore
Nov 14 - 20, 2005

A major jump in China's share
in the country's total imports is visible since 2002-03, which resulted
in worsening trade balance besides a substantial expansion in Pakistan's
economy in the last two years, has created an additional demand for
industrial raw materials and machinery imports from China.

According to the SBP's share
analyses on various Chinese imports some significant increase in shares
has been witnessed in automobiles, air conditioners, pharmaceuticals,
railways, rubber, textile machineries etc. For instance, the share of
automobiles has surged to six per cent in 2004-05, from 4.3 in 2002-03
and 3.3 in 2001-02; of air-conditioning machines to 43.7 per cent in
2003-04 from 24 per cent in 2002-03, and five per cent in 2001-02; of
pharmaceuticals to 7.5 per cent in 2003-04 from 6.2 in 2002-03. In
2003-04, around 118,327 TV sets found way in local markets from China as
compared to 53,235 units in the previous fiscal followed by arrival of
162,845 ACs as compared to 58,198 units. A total of 5,363 refrigerators
arrived in 2003-04 as compared to 756 units in the last fiscal year. In
automobiles, 27,604 bikes landed in Pakistan from China as compared to
7,338 in 2002-03.

In footwear, 793,962 pairs
reached here as compared to 589,920 pairs in 2004-05. However, it may be
noted here that the central bank's figures might have not reflected the
actual volume of Chinese goods as the SBP in its annual report has not
mentioned the arrival of finished footwear, toys, artificial jewelry,
stationary items, children's readymade garments, fabrics, gents suiting,
ladies clothing, computers, DVD, VCD, Hi Fi systems, telephones,
mobiles, TV kits and parts etc., through the legal channel.

The report carried only those
goods which are visible in official statistics and have impacted the
balance of payment, as well as in the national economy. The items which
have been missing in the report may have arrived in larger quantities
but its impact on the balance of payments has been negligible. The
Chinese goods which have captured the Pakistani markets by storm in the
last two years have been arriving through illegal channels, by
misdeclaration and under invoicing, etc.

Their entry may be rightly
marked at the Chinese Customs but these are being cleared at our ports
under the old practice of misdeclaration and under invoicing or finding
way into Pakistan though different illegal channels. If these goods were
cleared after payment of duties and taxes at the Customs, and strictly
checked at borders then the State Bank's figures on Chinese imports
might have been different. The Chinese diplomats in various meetings
with local traders have been saying that the trade figures of two
countries contradict each other as Chinese exports to Pakistan have been
much higher which is not reflected in official statistics available
here.

Local markets are now flooded
with the Chinese stuff. Producers of fabrics and clothes are more
worried over persistent rise in the market share of imported, smuggled,
under invoiced and misdeclared goods which are over 50 per cent. Some
market elements are happy in bringing clothes from China and selling
them at exorbitant rates. Chinese fabric for trousers have captured 40
per cent market share, while children garments dominate 70 per cent
market share. Footwear is well over 90 per cent, while foreign sweaters
enjoy over 50 per cent share.

Chinese sweaters have captured
90 per cent share in contrast to 40 per cent share in ladies garments
and five to 10 per cent in gents, and fabrics. Stationery products stand
well over 60 per cent. The Chinese products have made deeper inroads in
the hearts of Pakistani customers because of low price, though people
know about its inferior quality. However, quality conscious buyers avoid
buying these goods.

According to the State Bank,
China is becoming a major supplier for imports to Pakistan. Since these
goods are low priced, the surge in imports may not be a worrisome sign.
But there are some concerns that need to be highlighted. Firstly, the
central bank has said that import of goods that are also domestically
produced e.g., electronic goods, footwear, ceramics, plastic items etc.,
can hurt the domestic industry. In fact, the continuous increase in
supply of these goods at reduced prices is posing tough competition to
relevant manufacturing units. However, the SBP has said that this
competition is beneficial to consumers as they are enjoying the cheap
items. Domestic producers, on the other hand, will need to increase
their efficiency so that they could offer low priced goods to hold their
market share.

This has happened in the
domestically produced motorcycles. Second, in some cases, the Chinese
goods have completely wiped out the branded foreign suppliers. In case
of window/wall type air conditioners, the previously major supplier
Korea seems to have lost its share to China due to its inability to
compete in prices.

The unit value of comparison
reveals that from Korea an AC unit carries a tag of Rs 16,800 as
compared to Rs 11,600 from China. The substitution of expensive goods
with the low priced imports has lowered the country's overall trade
deficit. With a view to gain wider access to the Chinese markets,
Pakistan signed a Preferential Trade Arrangement (PTA) effective from
January 2004.